Motilal Oswal has given Neutral recommendation for Biocon with a target price of Rs. 385 in its research report issued on Feb 28, 2022

Motilal Oswal’s research report on Biocon

BIOS recently announced that its subsidiary, Biocon Biologics (BBL), has entered into a definitive agreement with Viatris to acquire its Biosimilar business for USD3.3b. The deal enhances BBL’s commercial/regulatory capabilities in developed markets and gives it the option to acquire b-Aflibercept (a potential Biosimilar asset). The valuation, based on estimates shared by the management, stands at 3.8x/3x CY22/CY23 sales and 16.5x/13.2x CY22/CY23 EBITDA. While the deal forward integrates BBL in the Biologics value chain, the valuation paid for acquiring the Viatris’ commercial infrastructure in developed markets is expensive.

Outlook

We raise our FY23E/FY24E EPS estimate by 3.4%/15% to factor in Viatris’ business. We value BIOS on a SoTP basis (valuing BBL at 30x EV/EBITDA for its 65% stake post-completion of the deal, valuing its 70.4% stake in Syngene at current market capitalization, value the Small Molecules business at 10x EV/EBITDA, and deducting a net debt of USD1.5b) to arrive at our TP of INR385/share. We remain Neutral given the limited upside from current levels.

More Info

At 17:30 Biocon was quoting at Rs 348.95, down Rs 45.20, or 11.47 percent.

It has touched an intraday high of Rs 397.00 and an intraday low of Rs 347.10.

It was trading with volumes of 476,751 shares, compared to its thirty day average of 187,660 shares, an increase of 154.05 percent.

In the previous trading session, the share closed up 5.36 percent or Rs 20.05 at Rs 394.15.

The share touched its 52-week high Rs 424.10 and 52-week low Rs 314.90 on 09 April, 2021 and 25 October, 2021, respectively.

Currently, it is trading 17.72 percent below its 52-week high and 10.81 percent above its 52-week low.

Market capitalisation stands at Rs 41,894.94 crore.

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